LNG World Shipping

Orders top deliveries in busy year for LNG shipyards

Elcano’s Castillo de Caldedas is readied for service earlier this year at an Imabari fitting-out berth

In the year-to-date, as of 20 August a total of 38 LNG vessels had been completed. This delivery blitz was topped by the placing of 43 newbuilding contracts

LNG World Shipping’s latest LNG carrier orderbook statistics cover the situation as of 20 August 2018 and incorporate the changes that have occurred in the 51 days since the last orderbook was tabulated on 30 June 2018.

What a dramatic seven weeks it has been for the LNG carrier fleet. The summer might be a quieter time for many industrial and commercial businesses, but activity among the LNG carrier (LNGC) shipyards has been at fever pitch; eight newbuildings were commissioned and 16 new ships contracted in that seven-week window.

Big year for deliveries

This latest part of the summer season has only added to what was already a particularly busy year for the LNGC yards. The latest eight deliveries bring to 38 the number of LNGC completions so far in 2018, comprising 34 conventional LNGCs, one floating storage and regasification unit (FSRU) and two small coastal carriers.

"What a dramatic seven weeks it has been for the LNG carrier fleet - activity among the LNG carrier shipyards has been at fever pitch"

Only five of this year’s deliveries to date entered service with short-term and spot trading looming. Nine of the completions were earmarked for the lifting of US export cargoes under long-term arrangements and another seven were destined for similar work on new Australian projects. Another 12 entered charters with major gas companies, to be apportioned among their global LNG supply portfolios as required.

The 16 ships ordered in the seven weeks to 20 August have lifted to 43 the number of LNGCs contracted so far in 2018. The complement comprises 39 conventional LNGCs, one FSRU and three LNG bunker vessels (LNGBVs).

DSME has been the principal winner of this year’s LNG order influx, with 12 newbuilding contracts secured, but the three other principal Korean shipyards active in the sector have also done well. SHI and HHI have each won nine orders to date, while Hyundai Samho Heavy Industries (HSHI), a sister yard to HHI, has finalised contracts to build eight LNGCs.

Greece’s independent shipowners have continued to strengthen their presence in the LNG sector, with 20 of the 43 LNGCs ordered in the year-to-date for the accounts of Greek owners. This includes Minerva Marine and Capital Gas Carrier, two established shipping companies now making their first forays into the LNG sector.

Two-strokes in focus

The emergence of two-stroke, low-speed engines as the favoured propulsion system for new LNGCs has been strengthened with this year’s newbuilding orders. While a four-stroke, dual-fuel diesel-electric (DFDE) system has been chosen for the newly contracted FSRU, and the propulsion system for four of the new ships is yet to be confirmed, two-stroke engines are to be fitted on 38 of the 43 ships ordered in the year-to-date.

Of the two, ME-GI engines, with gas supplied to the combustion chamber at high pressure, made the early running, following an inaugural order for the propulsion system for two of its ships by Teekay in December 2012. However, the X-DF option, which relies on a much lower gas supply pressure, quickly gained ground on entering the market.

Through 2017 the two engine suppliers split the LNGC newbuilding orders between themselves on a fairly equal basis, but 2018 is revealing a new pattern. Of the 38 ships with two-stroke engines ordered in the year-to-date, 24 will have WinGD X-DF engines and 14 will be powered by the MAN ME-GI option.

This split has some correlation with the yard awarded the newbuilding contract. DSME has achieved considerable success in its LNGC newbuilding programme of recent years with a combination of ME-GI engines, in tandem with its proprietary partial reliquefaction and fuel gas supply systems.

In contrast, the competing Korean yards of SHI, HHI and HSHI have tendered to favour the X-DF option and encourage owners considering newbuilding contracts to give the technology a detailed assessment.

Both ME-GI and X-DF engines have their advantages and disadvantages, but there is not much difference between them in terms of propulsive and fuel efficiencies. The technologies are still relatively new and industry debates on the merits of one technology over the other have so far proved inconclusive.

Wärtsilä has a contract to assist in the servicing of the WinGD X-DF engines set to power a growing proportion of the LNGC fleet

Total orderbook

The totals of LNGC deliveries and newbulding contracts for 2018 to date show a small net gain in the overall orderbook. The total LNGC orderbook, as of 20 August 2018, stood at 129 vessels, comprising 96 conventional LNG carriers, 11 FSRUs, 10 icebreaking LNG carriers, one floating storage unit (FSU), seven LNGBVs and four small-to-mid-scale LNGCs.

On addition, there are two non-propelled floating LNG production (FLNG) vessels; both are under construction at SHI and set for employment off the coasts of Malaysia and Mozambique, on behalf of Petronas and Eni, respectively. They are destined to remain on station over the lives of their respective contracts.

Korean shipyards are down to construct 93 ships in the 129-vessel orderbook, or 72% of the total. Shipbuilders in Japan will contribute 20 ships (16%) and those in China 16 ships (12%).

Of the individual yards, DSME has the largest backlog, with 43 vessels on its books. Next in line come HHI, with 20 ships, SHI 19, HSHI 10, Hudong eight, Kawasaki Heavy Industries (KHI) seven and MHI six.

One quarter of HHI’s orderbook is comprised of FSRUs; the yard will build five of the 11 regas vessels on order. DSME, SHI and Hudong will be contributing two each.

If all the ship handovers for the remainder of the year go according to schedule, the LNGC fleet will increase by 25 ships come 31 December 2018. That will make this year the busiest ever for LNGC deliveries; an annual tally of 63 completions is the equivalent of a shipyard delivery ceremony every 140 hours.

The forward delivery timetable shows that 2019 and 2020 will also be busy years for LNGC commissioning ceremonies, although nowhere near this year’s levels. A total of 43 LNGCs are due to be delivered in 2019 and 45 in 2020.

It is now past the point where a shipowner contracting an LNGC can be assured of a 2020 delivery slot and 2021 is now being quoted as the earliest possible completion date. A total of 13 of the recently ordered ships are booked for commissioning in the early months of 2021.

There is also a trio of 178,000 m3 newbuildings on the books at Imabari for a 2022 delivery, but the owner is unspecified and there are doubts that these ships will ever be constructed.